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Can Algorithms Transform How You Manage Your People?

Big data, aka ‘people analytics’, can facilitate hiring, retention and where your next office should be, reports James Day

In the 2011 Brad Pitt film, Moneyball, a baseball team assembles a successful squad of players based purely on analysis of their performance stats. It demonstrated that, while managing people is seen as a human task, big data can be a game-changer.

Switch from the baseball stadium to the workplace and big data is helping managers to more effectively hire and retain top talent, reduce turnover and improve diversity. Welcome to the world of people analytics where, according to global insight firm Leathwaite(1), businesses implementing it perform 30% better than their competitors.

What do we mean by people analytics?

While people analytics may sound like an algorithm for online dating sites, it’s actually a way to make better business decisions using data about human behaviour, relationships and traits. Which candidate should you hire? Who should you promote? Who’s considering leaving? Does that person deserve a raise? Big data puts hard evidence at your fingertips.

Why is it growing in popularity?

The technology already exists – people are just becoming wiser about how it can be used. A good example of this is in recruitment. “With technology providing job-seeker insights, companies no longer need to ‘go with their gut’ about who they hire, how they structure their teams, where they open offices and how they create competitive talent strategies,” says Jon Addison, head of Talent Solutions at LinkedIn(2).

People analytics allows managers to reap the rewards of data, because they have access to billions of real-time insights on where to find talent, how to attract it and how to retain employees.

“It’s clear that the role of insights and analytics in talent strategies is growing,” adds Addison. “This is partly due to the increasing need to plan for future workforces and skill requirements in a competitive landscape where businesses are vying for the best of a limited talent pool. For businesses predicting where they might be in 10 to 15 years, it’s becoming an irreplaceable tool for managing teams effectively and ensuring long-term success across companies.”

Is it just about hiring – or is there more to it?

People analytics is valuable in other ways, too – for example, in minimising staff turnover. According to an MIT report(3), recruiting, hiring and training a new employee can cost upwards of 1.25 times their salary, so smart hires and staff retention mean an attractive return on investment.

Looking at historical data can help companies identify patterns, help predict why and when someone is likely to leave the company and, ultimately, save the firm money. Being able to pinpoint the cause of why people leave the business – whether that’s down to a manager, an arduous commute, or the lack of a pay-rise or promotion – allows bosses to address the situation before it becomes a problem.

People analytics also helps to inform leadership development – identifying any current employees who can step into the shoes of a departing colleague by tracking their previous performance, success and other metrics. It can also pinpoint what motivates them.

Jon Addison, head of Talent Solutions at LinkedIn

What are the other benefits?

According to a recent global study by the McKinsey Global Institute(4), gender-diverse companies perform 15% better and ethnically diverse companies 35% better. People analytics can track and manage recruiting, hiring and the retention of a diverse workforce.

Analytics can also identify embedded expertise – more on that later – to highlight areas of best practice within a company.

How are businesses today using people analytics?

The Harvard Business Review recently worked with Microsoft’s Workplace Analytics division to observe several Fortune 500 companies using people analytics(5).

One example involved measuring a company’s processes to identify any embedded expertise. One global consumer packaged goods company looked at how a specific monthly financial process was tackled differently in each of its subsidiaries around the world. It discovered that one country was 16% more efficient at completing the task – equating to 71 fewer person-hours per month, with 40 fewer people. Not only was the company unaware of this, neither was the accounting team, which became a partner in the process for improving the other subsidiaries.

Microsoft itself was able to uncover a hidden talent ecosystem using people analytics. Looking to recruit cybersecurity professionals, but wary of limiting itself to hiring only in Redmond, where its headquarters were, it discovered, through data, another talent-rich location to mine – somewhere that it already had a very small office. Having these valuable insights meant business leaders knew they had to increase investment and head count in that city, allowing Microsoft to hire the best talent, in the best location.

A new future

People analytics can replace decision-making based on anecdotal experience, hierarchy and risk-avoidance with higher-quality decisions based on data analysis, prediction and experimental research.

While gut instinct still plays a part, big data can offer a helping hand in who you hire, how you structure teams, where to open new offices and how to compete for talent. For the first time, workforce data is accurate, reliable and real-time.

James Day is editor of Stuff magazine, associate producer at The Gadget Show and tech-editor-at-large for design and architecture title Enki